EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Question
Chapter 13, Problem 12RQ
To determine
To know:Advantages and disadvantages of flexible exchange rate, fixed exchange rate and currency union.
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Who would demand U.S. dollars in the foreign exchange market?
U.S. firms and households wishing to purchase foreign goods and services
Foreigners wishing to purchase U.S goods and services
U.S. households wishing to purchase U.S. goods and services
Identify two factors (or characteristics of economy) that underlie a nation’s decision to adopt a fixed exchange rate or a floating exchange rate.
Compare the effects of monetary and fiscal policies (i.e. strengthened or weakened) to maintain internal balance(s) of an open economy under fixed and floating exchange rate regimes.
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- Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt a flexible exchange rate or a fixed (hard peg) exchange rate?arrow_forwardWhat are the benefits of having a fixed exchange rate?arrow_forwardWe noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?arrow_forward
- how do companies protect themselves from foreign exchange fluctuationsarrow_forwardPlease explain flexible and fixed exchange rates. Show ways to maintain a strong or a weak currency.arrow_forwardDescribe, with detailed explanations, the four components of the current account of the balance of payments.arrow_forward
- What determines the value of a currency in the flexible exchange rate system ?arrow_forwardWhat are two ways in which monetary policies and tight budgets allow a fixed exchange rate system to be successful?arrow_forwardContrast the effects of having a fixed versus a floating exchange rate for a country’s economyarrow_forward
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